HS2 fights back

The reason for building HS2 can sometimes be obscured in the fog of argument about whether people work on trains, benefit-cost ratios (BCR) and the like. Writes Tim Smart, Head of Engineering and Operations, HS2 Ltd

There have been a number of negative comments in the media during the latter part of the summer concerning the likely outturn costs of HS2. Some from notable sources, but it is far from clear on what real basis these comments have been made.

It seems to me they were made more on the narrow and short sighted view that big infrastructure projects are not successful in meeting cost targets than a proper understanding of the proposals and strategies behind HS2.They also ignore recent successful projects such as the Heathrow Terminal 5, 2012 Olympics and the Channel Tunnel Rail Link – HS1.

Looking back at HS1

As the first truly high speed rail project in the UK and drawing heavily on the French TGV experience, HS1 faced a number of challenges on technological, commercial and environmental grounds – all similar to those HS2 is facing today.

Despite some early issues, Section 1 of HS1 from the Channel Tunnel through to Fawkham Junction, with the challenges of passing through Ashford, was delivered on time and under budget in 2003. In 2007, Section 2 through to St Pancras was opened on time and within budget.

By employing sound engineering techniques, modern commercial strategies and with a better focus on project control brought about by more up to date management, HS1 was able to deliver to plan.

Furthermore, in the final analysis, the HS1 financial model that eventually emerged proved very effective. It delivered an investment grade piece of infrastructure and an associated income stream for the Government, following the successful conclusion of a competition for the sale of a 30 year concession (and yes, the Government gets to sell it again) to a joint venture of Canadian pension funds. In doing so, this subsidised the building of the railway for the taxpayer by over £2.5 billion.

Additionally, pension funds need steady, predictable and relatively risk free investments. By purchasing HS1, two of the wealthiest pension funds in the world who are in the business of making canny economic decisions have voted with their dollar in support of high speed rail investment in the UK.

Preparing the figures

HS2 is currently in the final stages of preparation for the Hybrid Bill for Phase 1 (London to Birmingham). This, amongst other things, means we must have a reference design in sufficient detail to ensure we can build, operate and maintain HS2 to provide the expected benefits.

To do this, a more significant amount of engineering has to be carried out than that directly evidenced by the spatial arrangements articulated on the drawings, plans and sections which form the key engineering documents underpinning the Hybrid Bill. This has involved designing all the key elements along the route in sufficient detail to deliver the required railway parameters and balance the engineering proposals with other important environmental factors, associated mitigation and of course cost.

HS2 has been working with some of the world’s leading consultants and contractors to make sure we have robust railway engineering design proposals with associated construction plans appropriate for the reference design of the Bill. This forms the foundation for the initial cost estimate and it is a matter of fact that, as the engineering design develops and responds to consultations, so a more advanced understanding of the engineering solutions and risks emerges and the cost profile will change.

The estimate for Phase 1 was established in the Baseline 3 cost review. The Secretary of State announced in June this year a target cost of £17.16 billion (at 2011 prices) including a 10% risk allowance. During the spending round process the Chancellor agreed an indicative budget of £21.4 billion (2011) for Phase 1. The increase reset the cost to take account of scope revisions and allowed an appropriate and prudent contingency for the future ‘unknown unknowns’ which any project of the scale of HS2 simply must include at this stage.

Further efficiencies

One thing this is not is an open cheque book. This is about making proper and reasonable allowances for the emerging design and other issues that large infrastructure projects demand based on sound engineering and commercial principles and judgement. As more detailed information and data accumulates through the life of the project this contingency, can and must be effectively managed – and managed does not necessarily mean spent.

Opportunities for efficiencies will be identified and managed. HS2 is under no illusions concerning the challenge for achieving effective delivery. As the programme of any infrastructure project moves forward, the inevitable conflicting priorities of cost, time and quality will emerge. It is critical that the client organisation steps up to the plate to ensure the path through the cost-time-quality triangle is the right one, and costs will be under the closest scrutiny.

It is an understatement to say this has its challenges, and anybody who has delivered a successful infrastructure project will tell you that this will require firm, responsive, nimble and highly competent client management demanding sufficient autonomy and empowerment from a Government sponsor.

Dealing with this challenge is something HS2 Ltd and the Department for Transport already have well in hand. HS2 has established a framework plan to deliver 20% efficiencies going forward, realising that this starts with the client and key commercial and governance strategies. It also involves aligned incentives and working collaboratively with the supply chain and other key stakeholders such as Network Rail.

They too must be capable of rising to the challenge and delivering on it. I have no doubt that they will and this has already been affirmed in a letter to the Daily Telegraph in early September by a number of CEOs of the UK’s leading consultants and contractors. So to those who assert that HS2 will cost significantly more, I would ask – on what basis do you make these statements? Have you done the work that HS2 has done?

Connectivity not speed

There has also been much chatter within the media about HS2 either diverting money from other infrastructure projects, or that the money allocated for HS2 would be better invested in enhancing the existing rail network. Again, to my mind this demonstrates a further misunderstanding of what HS2 will deliver. It is not about getting to Birmingham or Manchester, Leeds or any other northern city faster. It is about capacity and connectivity. Network Rail has stated that it cannot provide the future capacity the nation will require by piecemeal upgrades.

It is an immovable fact that passenger numbers have doubled to 1.5 billion over the last two decades and the demand for freight has grown by 60% since privatisation. As the UK population expands we must find sustainable solutions to underpin our transport need which is vital to ensure a thriving and vibrant economy across the UK and not just London. HS2 provides the backbone to achieving this and will work in harmony with other transport solutions.

In terms of capacity over the distances proposed, HS2 can move more people per hour more sustainably than other forms of transport. The distances between London and the northern cities which HS2 will serve are particularly well suited to high speed rail as the most efficient means of moving people. It is not practical to enhance our highways or airports for these distances and we must look to encourage a modal shift from short haul air to rail. This also has the not insignificant advantage of handing capacity back to our airports to serve other longer haul destinations for which rail is not so well suited.

The West Coast main line, Britain’s busiest intercity route, will be full within 15 years despite the fact that it has already been upgraded at a cost of some £9 billion by Network Rail between 2004 and 2008. Further enhancements are simply not practicable and cannot deliver the capacity which the nation requires. We must take a long term view on the solution to our rail network issues as we have seen in other parts of Europe, Asia and now even in the US.

HS2 will be the long required step change for UK rail and enhance the existing network by releasing significant capacity which pretty well forces a complete recast of the national time table. The published August 2012 economic case for HS2 set out a modelled train service and there have been comments from some quarters about possible reductions in service in some areas. However, this boils down to a debate on how best to utilise this released capacity and this is a very good position to be in for the UK’s transport planners.

This released capacity also means there is much better proposition for freight services which of course takes goods off our congested road network and helps relieve capacity here too. All this reinforces the point that HS2, by its very existence, enhances and complements existing transport systems and not just the rail network.

Top down or bottom up?

Some of the criticism in the media has also dwelled on the economic case for HS2. To my mind this is always a difficult area, as to obtain a true picture one must look at the wider economic benefits and these are more difficult to predict and therefore not always adequately accounted for in traditional cost benefit analysis.

In the UK, Europe and many other parts of the world rail projects are typically financed ‘top down’ from Government money. The BCR predictions for infrastructure projects under these arrangements typically focus on the demand side economics which, to my mind, often do not take sufficient cognisance of the supply side benefits.

In the US the significant element of financing for infrastructure projects comes ‘bottom up’ from local sources such as the individual states and cities and is therefore raised via local taxes. Under these circumstances there is much more of an incentive placed on demonstrating regional benefits in terms of growth and job creation which brings into sharper focus the supply side of the economics equation. Consequently, in the US, methodologies have been developed to provide a better understanding and predication of the regional benefits of infrastructure projects at a much earlier stage.

This is something I would like to see developed further in the UK. Fortunately, in the case of HS2, this has been addressed in the KPMG 100 report. This report shows benefits to the UK from HS2 of up to £15billion per year, with regions in the north benefiting twice as much as those in the south. As an engine for growth, HS2 will be a significant opportunity for the UK to realise these wider benefits and, with the announcement that Lord Deighton is to lead the growth task force, these will become even clearer in the future.

Proven benefits

A report published in 2009, after the construction of HS1, revealed £4 billion of regenerative benefit along its route. This is evidenced right now by the impressive new development for higher education, affordable housing and commercial property currently being constructed at the back of St Pancras. One can point to the success of the 2012 Olympics, the economic boost the Stratford area has received following the opening of the Westfield shopping centre and the growing retail success at Ashford as examples of how high speed rail has underpinned regional transformation. This provides the real, hard evidence of the stimulation and regenerative benefits caused directly by high speed rail.

In terms of potential for growth I would also cite the often maligned Jubilee Line Extension Project (JLE) in this regard. This did not have the highest BCR and did run late and over budget. However the JLE opened up the development of Docklands with its associated significant economic benefits for London. Furthermore, as well as providing critical connectivity for East London, it delivered a fabulous architectural heritage to the underground system. Would we suggest now that the JLE has not been important for London and we should not have built it?

So as HS1 and the JLE have provided important economic and regional growth for London and the south east, HS2 will deliver these benefits to the great cities in the midlands and the north which have long been deprived of decent connectivity. It will promote growth and more importantly the jobs associated with this growth.

As a nation, we need to get firmly behind HS2. Dealing with the solution to our transport problem is a big ticket item for the UK and demands serious infrastructure and serious decisions. I wonder, where would we be now if the Victorians had shied away from this responsibility?

22 Comments

I am not sure this constitutes fighting back. The public think the line is an A to B and then onto D and C argument. A is London B is Brum; C and D Manchester and Leeds. They have not been given a glimmer of the whole system benefits. No one yet knows a train , TGV or AGV, from t'north reachcjing Lichfield in Stage one can then accelrate and get to Gospel Oak, leaving the overloaded Rugby to Euston line aside.

Becasue the speed issue has fialed to gain traction as it once did - I saw Mallard through Doncaster - we are now trying capacity. The answer has to include Scope too.

Liverpool Glasgow and later York, Darlington Newcastle all benefit - and in all well-meant humour who wants to get to Birmingahm more qucikly.

I started off anti-and it was not until I read some facts in Rail Magazines I became unreservedly for.

KPMG's report indicates the net effect on Liverpool will be negative. Many other towns and cities will suffer the same fate.
The Port of Liverpool, which is building a large extension to its container terminal to coincide with the widening of the Panama Canal, and currently enlarging the locks into its existing docks system, had voiced great concern that there will not be enough rail capacity once the port is in full flow. They state that HS2 has to be run into Liverpool to get trains off existing lines. Liverpool is the only deep water port on that coast and vital to the economies of the North West, West Yorkshire, Midlands and North Wales. The smooth flow in and out of the port is essential and that is predominately via rail.

Excellent article, but the title is unhelpful. We need compromise between those who want HS2 and those who oppose it, not the continual confrontational dog fight we see in the press almost every day. HS1 is a success because the highly unpopular routes presented by BR were changed in favour of the present route which follows existing transport corridors. That stage has not arrived with the highly controversial route through the Chilterns which was chosen specifically because of the perceived need to run at the very highest possible speeds. The challenges of passing through Ashford were only achieved because Railfutlure and Kent CC lobbied for high speed trains to call at the station rather than an out-of-town location originally proposed.

A heading in the article says 'Connectivity not Speed', but the connectivity of HS2 is very poor in comparison with what can easily be achieved. The siting of high speed stations at Birmingham and Leeds about a quarter mile from the platforms where all connecting services call is a real barrier to onward travel, especially with heavy luggage, with disabled people or children and even more so in very hot cold or wet weather. Out-of-town stations at Toton and Meadowhall will not bring much economic growth to Derby, Nottingham and Sheffield where good connectivity requires that high speed trains leave HS2 and call at the main city centre stations. Reaching Nottingham and Derby from London via HS2 will take about 105 minutes when proper allowances is made for connection times. With electrification, London to Derby will be 85 minutes via the MML and Nottingham only a few minutes longer due to final recovery time.
The KPMG report that claims HS2 will deliver £15 billion of benefits per year on a £33 billion investment seems far too good to be true, especially when there are many other benefits that HS2 will deliver and when the further connectivity benefits from its shortcomings I have described above are also added.

There is still a lot to do to get the route and stations right for better connectivity before claiming it is right for the UK. Those opposing HS2 can pick too many holes in the present plans.

And one of their main tactics to continue to ask for changes to the route, stations, etc, in the hope that this will cause delay. The route through the Chilterns has already been revised, and some issues are irreconcilable: You want a direct link to the centres of Derby AND Nottingham? Look at a map. Towton is the best compromise. The time for tinkering and delay is over. We have a route which is already a compromise, and we need to stick with it.

The route is hardly a compromise, or if it is, takes no account of Liverpool which is v poorly served by the current route (i.e. not at all N of Crewe). Presumably the Liverpool City region with a population of 2 million + is one of those great Northern Cities HS2 is supposed to be benefitting economically and connectivity wise. KPMG's report indicates the net effect on Liverpool will be negative. This hardly amounts to convincing justification under the widely touted business case. Route still in need of significante amendments to ensure it is truly of maximum benefit for the maximum number. Graham Nalty is Spot on.

Not factually accurate. The £2.048m paid to lease HS1 is simply a subsidy securitisation. Goverment gives subsidy to the integrated kent franchise (southeastern), who then give it to HS1, who then pay borealis / OTPP. This is underpinned by a direct government guarantee to continue to subsidise the future highspeed operations of any sucessor franchises. It is all just smoke and mirrors to (expensively) reduce government net debt.

You are correct to call attention to the financial chicanery around HS1 and the CTRL. The NAO's report is worth a read. As for the author's connecting the redevelopment around St Pancras with HS1, it's that old thing that correlation is not causation..

So, you are claiming that when a large business relocates to a transport hub that's just a correlation. They didn't take the transport hub into account in their decision and there's no cause and effect at all. That seems very unlikely to me. We could always ask them why they moved of course.

"Fortunately, in the case of HS2, this has been addressed in the KPMG 100 report."

The KPMG report is a shameful piece of work, which blithely makes a number of ridiculous assumptions in order to reach a fanciful conclusion. £15bn per year, one-third going to the Exchequer? HMT would be out there with spades if that were credible.

Surely the principal need is not to cut the growth of short-haul air but to get people to transfer from car to rail? High speed rail does not provide connectivity at the local level where it is most needed.

There still seems to have been no estimate given for the cost of a conventional speed railway on essentially the same alignment, which could mostly use existing track or track-beds including the old direct GW route through Greenford, the GC and the cross connections between the two in Buckinghamshire.

A very good article.. I have worked on both CTRL 1 and 2 which became HS1 and have seen first hand the employment it generates
and not just on the rail side. Ashford for instance built 30.000 new
homes. New homes built in Ebbsfleet and the regeneration of stratford (albeit the 2012 games helped) all help to keep the economy going and I believe HS2 will have the same effect.

You are alone in this thinking - along with the HS2 bosses of course. The Newsnight expose I hope seals the fate of this flawed design. The 2006 Eddington Report got it right:

1. That the UK's transport network is broadly adequate, connecting the right places.
2. HMG does not need to worry about building new infrastructure such as high-speed rail links and cross-country motorways.
3. HMG should concentrate on improving existing road and rail networks.

HS2 has only FOUR cities with city centre stations. They said HS2 serves "regions" and the people in these regions would travel to these stations to go to London - where else can they go to? Manchester Leeds and Birmingham do not even have rapid-transit rail networks to get people to the stations. So they will go a breakneck speed from London to Leeds and trundle through Leeds' traffic in bouncy buses. All cities on HS2, apart from London, have poor regional access.

The only cities that can get people fast to and from their city centres, using rapid-transit rail, underground in the centres serving mainline stations, which would ensure success of HS2, are London, Liverpool, Newcastle and Glasgow. Only London is on HS2. Who thinks of this? Well the private lobby group Greenguage did, who have an agenda. Then the HS2 bosses just took up what they said.

Many people have looked at this debacle and saw the utter stupidity of the whole design. If business leaders want HS2 they had better start a move to get it redesigned to serve all major cities to and rom their centres - and interconnect these cities.

Thanks, just read it. Light rail is very a misused term. Trams is electric buses on rails that mix with street traffic. This is better than nothing, and far better than choppy buses, but hardly the rapid-transit that Liverpool, Glasgow and Newcastle have. Trams will not give the rapid wide access needed to make it succeed. The TGV in Paris is a success as the Metro and RER get people to the stations fast and easily. The area around the Lyon station is hardly encouraging.
Unless people can get to the HS2 stations quickly from the city the stations are located and from wider area as well, it will not be the success it is hoped and not generate economic growth in the regions as the HS2 bosses foolishly have been predicting. Thinking that people will flock to the HS2 because it is there is just plain foolish.

HS2 Plan B is a whole-scheme alternative to HS2. It starts with a fast-connecter crossrail from Manchester Victoria to Leeds, halving the rail time for the forty miles between these two city centres and fast-connecting East Lancs to West Yorks for the first time. HS2 will not do this. Instead, it will build a ninety mile fork beyond Birmingham to Manchester Piccadilly and another one to Leeds.
Here's the Plan B website:

As Manchester Victoria and Leeds are run-though stations, there would be scope to upgrade local lines and halve the rail time between the centres of Liverpool (or Bolton or Southport) and Leeds and York. Liverpool-Hull would be quicker, too: good for drawing together the two sides of the northern economy.

Plan B's London destination would be St Pancras, not Euston. Plan B's trains would be successors to the inter-operable Class 395 commuters on HS1. They could either terminate in the main line station or run through to interchange with Crossrail at Farringdon or with the Southern system at Blackfriars. Or they could run on to Croydon, Gatwick and Brighton.